Flat-rate pension of £144 confirmed for 2016 - while end of state second pension hands the Treasury £5.5bn

The Chancellor has confirmed that the flat-rate state pension worth £144-a-week in today's money will start in April 2016 - a year earlier than previously planned.

The new rate will mean extra income in retirement for millions - particularly the self-employed, the lowest earners, married couples, some women and public sector workers - who would currently only be entitled to the basic state pension or less.

But the abolition of the second state pension (S2P) means that many others, mainly higher earners, will see their retirement income fall.

Pension changes: The introduction of a new single-tier pension is expected to benefit as many people as it will afflict.

It is expected that by the time the flat-rate pension comes in it will be worth £155-a-week, with married couples getting double that. The current basic state pension is worth £107.45-a-week, or £171.85 for couples.

The S2P meanwhile has the potential to increase this weekly income to more than £200 depending on how much you earn and how many years of National Insurance contributions (NICs) you have been making.

Those who have already built up an entitlement to extra pension contributions greater than £144 through S2P or SERPS (State-Earning Related Pension Scheme) will have these payments protected when the additional state pension is abolished in 2016, but they will no longer be able to add to them.

Bringing the new pension forward by a year brings an extra 400,000 people into it, including the 85,000 women born between April and July 1953 who faced losing out because of a second rise in their state pension age.

The abolition of the S2P also means an end to 'contracting out' of occupational pension schemes, which saw employees and employers on final salary pensions opt out of the S2P, paying their money instead into their pension scheme while paying less in National Insurance.

Approximately 6.4million people on contracted out pensions now face paying an extra 1.4 per cent in NI contributions, but will receive more from their state pension as a result in retirement. Employers meanwhile will have to pay 3.4 per cent extra in NI contributions.

George Osborne said in his statement: 'An individual who is 40-years-old when single tier is introduced in 2016 would contribute an extra £6,000 in NICs over the rest of their working life.

'But they would get an extra £24,000 in state pension over their retirement. That is a fair deal and a progressive pension reform.'

Ending contracting out will generate an extra £5.5billion in NICs, which the Government will use partly to pick up the bill for a £2,000 a year cut in employers' NI costs.

Experts have previously warned that the changes could spell the end of the 6,300 final
salary schemes still in existence because employers will no longer get their NI rebate.

Pensions minister Steve Webb has previously said that the introduction of the single-tiered pension will be cost neutral for the Government, with as many gaining from it as losing out, to make for a 'fairer' system.

Pensioners will still be hit by the so-called 'Granny tax' announced last year, which from April will see the amount new pensioners can take in income before being taxed reduced to the personal tax allowance of £9,440.

For those aged 65 to 74 it is £10,500, while for those 75 and over it is £10,660.

But to blow of this tax has been softened by the news that as of April 2014, the personal tax allowance will rise to £10,000.